University braces for $2.7 million shortfall

Gov. Matt Bevin delivered his State of the Commonwealth and budget address Tuesday, where he called for fully-funding the state pension systems, by proposing a 6.25 percent spending cut to state agencies.

“That is what it is going to take to balance our budget,” Bevin said. “We don’t have any alternative. The only alternative is to generate more revenue. That conversation will come with tax reform.”

Bevin will also eliminate 70 mandated programs to save money. He did not identify these 70 programs in his budget address, but he said they are “scattered throughout state government.”

Bevin and legislators have made little headway in passing a pension reform bill. Last October, Bevin unveiled “Keeping the Promise,” his 30-year plan to fix the state pension by moving state workers from defined benefit plans to 401(k)-type plans, although it did not gain enough Republican support to pass in special session at the end of 2017.

As the House and the Senate are working toward balancing the budget, Bevin said the pension system is a priority in order for Kentucky to meet its obligation to state employees.

Currently, the Kentucky Retirement System (KRS) is only 13 percent funded. Bevin broke down what 13 percent funded looked like for state workers wanting to retire. If 100 workers are retiring, he said only 13 would receive their retirement money.

While the Kentucky Teacher Retirement System (KTRS) is 56 percent funded, Bevin said that means 56 retiring teachers out of 100 teachers would receive their full retirement.

“Never once in the history of Kentucky has the ARC (Annual Required Contribution) been fully funded for all of our pension systems,” Bevin said. “Not one time, which is why we now find ourselves in a situation where they are all so severely underfunded. This year they will be funded in their entirety for the first time in the history of the Commonwealth in Kentucky.”

However with 14.5 percent of the general budget going to fund Kentucky’s pension, Bevin said it makes it difficult to protect education.

Higher education will experience a 6.25 percent reduction, along with many other state agencies.

On Jan. 17, President Bob Davies sent an email to faculty and staff regarding Bevin’s budget address. In the email, Davies said the 6.25 percent reduction correlates to a $2.7 million shortfall, which does not include an additional $4.8 million to cover pension costs. These numbers are not concrete, as Davies said the university is checking the costs with the Office of the State Budget Director.

Bevin’s proposed budget bill was posted on the Legislative Research Commission website, where the 70 programs that will no longer be funded are listed. Murray State’s one mandated program, Breathitt Veterinary Center in Hopkinsville, is not on the list for elimination.

Davies said the university welcomes feedback as they create a leadership team to discuss budgetary cuts and the university’s next step in this process.

Bevin placed emphasis on the hardships the budget cuts will have on the state, but he said we have to come together to create solutions that are necessary to balancing Kentucky’s budget and bettering the state.

“These are serious times,” Bevin said. “These are the times that try men’s souls. Nobody likes the idea of having to cut budgets. No one likes the idea of having to make these difficult decisions. There is not enough money. It is easy to throw stones without coming up with solutions.”